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How To Qualify For An FHA Loan

FHA loans help you buy a home with limited credit or a reduced down payment. Learn how to qualify for an FHA loan and what to expect when you apply.

The FHA loan program makes it possible to purchase a home with as little as 3.5 percent down and with a lower credit score than required by traditional mortgages. (Click here for a thorough introduction to the FHA loan program.)

FHA loans are not just for first-time home buyers, and they’re not restricted to low-income applicants. Here are the requirements you’ll need to meet to qualify for an FHA loan.

1. Have verifiable income.

Steady income that you can verify with pay-stubs or tax returns is the first and most important requirement to get an FHA loan. In general, lenders want to see that you’ve worked for a year or two in the same field (if not the same employer). Under the FHA program, a lender may accept a shorter work history.

2. Be able to afford the housing payment AND any existing debt. 

The biggest factor in qualifying for an FHA loan is whether you can afford the payment. As a rough guideline:

  • your mortgage payment must not be more than 35 percent of your income (before taxes) and
  • your mortgage payment PLUS other monthly debt payments (car loan, credit cards) must not be more than 48 percent of your income.

You can use our home affordability calculator to see approximately how much house you can qualify for. If you can’t meet these ratios yet, focus on paying off as much other debt as you can before buying a home.

3. Save at least a 3.5 percent down payment.

The minimum required down payment for an FHA loan is 3.5 percent. In reality, you’ll need to save closer to 6 percent of the home’s purchase price to account for closing costs- – which include an upfront mortgage insurance premium equal to 1.75 percent of the home’s value. You can reduce this premium to 1.25 percent by undergoing an FHA-approved credit counseling program prior to closing.

4. Have an established credit history.

At the bare minimum, the FHA requires that applicants have an established credit history with at least two lines of credit (for example, a student loan and a credit card).

5. Have a FICO score of at least 580-640.

The minimum FICO score to qualify for the FHA loan program is 580, but the FHA is not a lender, it’s the insurer, and it’s the lender who sets their minimum credit score requirements, which often sit around 640 for FHA loans (as opposed to 700 for conventional mortgages).

If you don’t know your credit score, check your it now for free. If your score is well above 640, you’re safe to apply for an FHA loan. If not, call your chosen mortgage lender and ask what their minimums are for processing FHA loan applications before you officially apply.

6. Purchase a home that does not exceed FHA loan limits.

There are federally-set limits to how much you can borrow with an FHA loan that vary by state and county. Fortunately however, the limits are high enough that most borrowers should not need an FHA loan to buy a more expensive home.

7. Apply for the correct type of FHA loan.

Lenders offer a variety of FHA loans in addition to the most common type, the 30 year fixed interest. You can also get a fixed interest rate on an FHA loan for 10, 15, 20 or 25 years or you can get an adjustable rate FHA loan. An adjustable rate loan allows for the fluctuation of interest rates at certain periods of time. For example, a 3/1 adjustable rate FHA loan means the interest rate is fixed for 3 years and can adjust every year thereafter. FHA adjustable loans come in the form of a 3/1, 5/1, 7/1 or 10/1 with 30 year terms. These are not as popular as fixed interest FHA loans since they provide more risk to the average homebuyer.

8. Understand the costs of an FHA loan.

The drawback of an FHA loan is the mandatory private mortgage insurance (PMI). PMI is insurance you must pay as the borrower — both upfront and monthly — that protects the lender in the event you default. PMI is required for anybody who puts less than 20 percent down on a home. Learn more about the fees associated with FHA loans.

9. Begin the application process.

If you believe you qualify for an FHA loan and are ready to apply, the first step is to get pre-approved with your lender of choice.

This could be your local bank or credit union, an independent mortgage broker, or any number of national online mortgage lenders.

Don’t be afraid to begin the process with one or two lenders and get quotes for rates, fees, and payments. Even with an FHA loan, the mortgage lending business is competitive and the differences in rates or closing costs could save you thousands.

Published or updated on November 6, 2013

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About Sarah Davis

Sarah Davis is a real estate broker in San Diego, Calif. She enjoys helping both buyers and sellers and was voted one of the top 10 best real estate agents in San Diego in 2013 by Union Tribune readers. In her spare time she talks about real estate on a local radio show and manages her website


We invite readers to respond with questions or comments. Comments may be held for moderation and will be published according to our comment policy. Comments are the opinions of their authors; they do not represent the views or opinions of Money Under 30.

  1. Sarah says:

    I have a question regarding credit requirements. Does it matter how long your credit history is if you meet the credit score requirements?

  2. Sarah Davis says:

    Hi James, great question. You may not like this but unfortunately, FHA loans are intended only for those who will occupy the property as their primary residence. There may be many people who do get FHA loans, move out and then rent the property out (not sure there is much regulation on that matter). But truly, if you get an FHA loan, you are required to check “owner occupied” on the purchase contract additionally confirm it on the loan docs. Therefore, if for some strange reason the lender did find out that later on you were not living there and you were renting it out, it COULD be considered mortgage fraud. Again, not going to say how likely that is to happen, but just something to be aware of. I personally wouldn’t feel comfortable doing so unless I refinanced into a conventional and then rented it out.

    You’d probably be better off purchasing the 1st house with a conventional, 20% down (if you have the money now), living there for a bit, then renting that out to her and then getting an FHA on the 2nd house for you to live in.

    Let me know if you have any other questions. Hope that helps!

  3. James says:

    “FHA loans can only be made on owner-occupied properties. ”
    Regarding this statement, I plan on buying a house soon with an FHA loan. Live there for a year then get a lease agreement and rent it out to my mom. Next i want to purchase a house for myself with 20% down payment. Is this possible to do with FHA as my first property?

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